Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9724501 | International Journal of Industrial Organization | 2005 | 27 Pages |
Abstract
We analyze the time-series of prices in the Spanish electricity market by means of a time varying-transition-probability Markov-switching model. Accounting for changes in demand and cost conditions (which reflect changes in input costs, capacity availability and hydro power), we show that the time-series of prices is characterized by two significantly different price levels. Using a Cournot model among contracted firms, we characterize firms' optimal deviations from a collusive agreement, and identify trigger variables that could be used to discourage deviations. By interpreting the effects of the triggers in affecting the likelihood of starting a price war, we are able to infer some of the properties of the collusive strategy that firms might have followed.
Related Topics
Social Sciences and Humanities
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Economics and Econometrics
Authors
Natalia Fabra, Juan Toro,